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I live in northern Virginia (DC suburbs). We just bought our second home two years ago. Our lender flat out told us we could pretty much get approved for as much as we wanted, $500k and beyond.
I have always been confused about lenders' estimate of "what they will lend you" and how it varies by region.
In 1995, we had lenders willing to lend us $200k in SoCal at our income level. In Cleveland a month later, lenders were only willing to go to $140k.
I wish I could. Man, a lot of the people here must be rich, or lucky enough to live in low property-value regions.
As a teacher I make $44K, plus an extra $10K if I can work summers. I currently rent an awful apartment for a couple hundred below my "means." The result? I live in a place where the walls are so thin I can hear the college party 2 doors over, the spousal abuse downstairs, and occasionally have to ward off drunks from my breezeway area.
"Below my means" is up to about $130K. You're lucky to get a double-wide in my city for that. In fact, a double-wide short-sale was recently listed at $140K.
Yeah. I also find discussions like this 'interesting." Given that "below one's means" is such an individual thing. (based on income, location, other financial obligations, not to mention a person's own comfort level with debt)
My husband and I have owned five homes. The first mortgage felt like a stretch at 150% of annual income, but in hindsight it was well within reach. Our second mortgage was just about one year of household income. Our third home purchase was in an expensive region, and the mortgage amounted to 200% of our annual household income. When we bought our fourth home, we had some pretty serious equity from the previous home sale, so the mortgage was about 75% of annual income. Our fifth house was a cash purchase. We had always planned to be mortgage-free twenty years from the date of our first purchase. We made it with two years to spare!
Last edited by randomparent; 03-25-2014 at 03:48 PM..
Right after my divorce and when I lived in Tennessee, I was approved (based on my income) for a home loan of $125,000. I had good credit but I didn't have a lot of credit, so had applied on a whim during my divorce, wondering if I would qualify. When I got the news my first thought was "Great!". My second thought was "Are they crazy? I can't afford a $125,000 house".
This was back in about 2007 when credit was easy to come by and we all know how THAT turned out. I ended up buying a house for $70,000 and could sleep easy at night not having to worry about how I was going to make the mortgage every month.
I still have that house (and am renting it out). My husband and I recently bought another house in BFE Idaho. Thirty minutes from the nearest town and we got it for a little bit of nothing because we live in the middle of nowhere. But actually we don't - 30 minutes from town in one direction, 30 minutes to another town in a different direction at the base of a mountain chain, two minutes to thousands of acres of BLM land, a big house that was structurally sound but needed all kinds of cosmetic updating.
It wouldn't have been our first choice of location if we had plenty of money, but for the price we paid, we couldn't have asked for a better deal. All depends on what you want from a house, but overpaying for a home because of arbitrary rules-of-thumb is just dumb. When you have limited resources you just have to make decisions about what you need vs what you want from a home.
Overpaying - bad. Sleeping easy at night and having enough money left over every month to actually live instead of existing - good.
Our first house (the one we live in now) was bought at less than 50% of what we were APPROVED For with a bank loan. It's been a good starter home and there was no need for us to spend nearly what we were approved for. At the time we bought the house (4 years ago) our incomes were lower, but today, the house value is nearly 1:1 to the sum of both of our incomes and the mortgage is obviously less than the sum of both our incomes.
I bought a house just barely within my means when I was making a very modest salary.
But I have stayed in it and have not "traded up", even as my income has improved. And it is
getting close to being paid off.
I'm looking for one below my means... I was approved for almost $600,000... which I think is crazy and why SO many people get in housing trouble. No way in heck would I go that high...
I'm looking for something no more than $250k... but it is VERY hard in the DC metro and for what I want (near a metro). But then I want travel again and start doing things like going to plays, etc... things that don't cost that much money but all together cost a bit of money every month.
I bought a house just barely within my means when I was making a very modest salary.
But I have stayed in it and have not "traded up", even as my income has improved. And it is
getting close to being paid off.
Same! It was scary the first time, interest rates were 14%!!!! But we did it, and traded up to a nicer neighborhood and only slightly larger house, 8 years later when the kids started school. After that our means went up a lot and we did not upgrade to a bigger house, but fixed up our small house instead. It wasn't an investment for us, ever, it was just place to live. But it turned out to be the best investment we ever made. It was all about timing and luck.
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